Global Consumer Insurance Survey 2012

Insurance giant chooses integrated Asia-Pacific FSO teams

Our reputation as the most globally integrated professional services provider is earning success in Asia-Pacific. It was one of the reasons why insurance giant Prudential appointed an integrated global Financial Services Organization (FSO) team including Asia-Pacific colleagues from Hong Kong and Singapore to assist in its response to the US Foreign Accounts Tax Compliance Act (FATCA).

How to address FATCA is an issue facing many clients and targets across Asia-Pacific and globally. It's a new legislation that requires affected financial institutions to identify their customers and prove whether or not they are US citizens. Our joint Advisory and Tax approach to helping clients comply with FATCA, along with our ability to provide an integrated global team, was an important factor in winning the assignment with Prudential, which has operations in 10 markets across Asia-Pacific.

"By teaming across Tax and Advisory in Singapore and Hong Kong, as well as with our FSOs in EMEIA and Americas, we were able to demonstrate to Prudential how our integrated global network matched their global needs," says Insurance Practice Leader, Asean, Graham Handy.

With spreading internet and mobile self-service channels, IT enabled advisors, brokers, and a host of sensitive data, insurers have become prime targets for cyber-criminals. The gap between how security is currently managed and the increasing risks is growing. In our second article, we take a look at how insurers can close this gap in a continuously changing environment. Click here to view.

Lastly, the final FATCA regulations have recently been released. Please see below for a summary of what this means for the insurance industry.

On behalf of the EY team, I would like to wish you a safe and prosperous 2013. We hope you had a good holiday season and look forward to sharing Insurance Agenda with you again this year.

On 17 January, the United States Treasury and the IRS issued final regulations on FATCA.

For Australian insurance companies without an international presence, including local operations of foreign insurance groups, the final regulations are expected to be less relevant than any intergovernmental agreement (IGA) which may be entered into between Australia and the United States.

We understand that negotiations are currently underway between the Treasury departments of both countries and expect a draft of the agreement to be released for comment in the near future. Notwithstanding the likelihood of an IGA, because the final regulations contain similar provisions and terminology to that used in the Model 1 IGA, they do provide some insight in the manner in which the provisions on an IGA may be applied.

Of relevance to the insurance industry is that the final regulations provide further clarity in relation to the definition of cash value insurance contracts and annuity contracts in the following manner:

The regulations remove the reference to US tax law. Instead, the regulations provide plain language definitions and, where necessary, references to treatment under local law.

The regulation provide an effective de minimis rule for cash value insurance contracts with a cash value of USD $50,000 or less.

The regulations expand the exclusion for term life insurance contracts to exclude those contracts which have increasing premiums. Other conditions such as the premiums having to be paid at least annually remain.

The regulations clarify that indemnity reinsurance between two insurance companies is not a financial account.

Further details in relation to the final regulations can be found in our International Tax Alert and we expect to release an insurance specific alert in the near future and on our dedicated FATCA microsite.

Risk and capital management functions are facing significant challenges. Against a wave of regulatory reform and highly uncertain macro-economic trends, getting the right balance between capital levels, ROE and growth has never been more important.

Insurance companies around the globe are refocusing their efforts to improve overall operational efficiency, squeezing costs out of the system without impairing the overall customer service experience.

In an intensely competitive and capital constrained market, attracting and solidifying customer relationships is central to achieving sustained growth.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.